Unlike 2021, 2022 has started on a whim for cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), which for several months have been trapped in a relatively narrow trading area.
BTC is ready for breakout, but which way? The crypto-research company Glassnode points to several bullish indicators:
- A 23% year-on-year growth in BTC wallets and a total of almost 40 million wallets with a positive balance, which is 40% more than at the end of 2017
- There are signs that BTC holders are reluctant to sell. More than half of the coins in circulation are now inactive for more than a year – a sign of patience on the part of buyers; and,
- Although prices were corrected from all-time highs in 2021, there was an accelerating trend from liquid to illiquid wallets – meaning a weakening of sales pressure as buyers appear ready to hold on in the long run.
However, the news is not only positive. BTC’s inability to hold above $ 50,000 (it traded this week to just over $ 47,000) signaled weak demand at the end of 2021, a trend that passed into the new year.
Read: Cryptos hitting lower lows and lower elevations are still not that bad
Plan B, which created the stock-to-flow model as a way to help predict BTC prices, says that while most people fear further declines in the BTC price, the stock-to-flow model shows the price in the low end of $ 50,000 – $ 200,000 band, which is a buy signal.
The stock-to-flow model was originally applied to gold and silver and has now been applied to crypto. The model compares BTC’s current stock of coins with the rate of new production. The resulting ratio has been remarkably accurate in predicting prices, but less so in the last few years.
The Crypto Fear & Greed index remains firmly between “fear” and “extreme fear”, which is often seen as a buying opportunity, although a recent newsletter from AuBit sees this as a sign that the feeling “is somewhere between ‘bull market over’ and pure apathy at this time ”.
“Retail has been a state of perpetual fear, which may mean we want a market dump to remove the lows,” says AuBit.
“BTC scenarios have changed a bit. BTC will probably test $ 37k and hopefully not $ 24k. In any case, it should be a good buy to start buying from here. Rejection of $ 50,000 confirmed in a way that 2022 will not start strong. The annual targets show that this year is likely to be consolidation unless we break well above $ 100,000, “it adds.
As Coindesk notes, BTC tends to fall in January, a month that has seen an average return of -3.3% over the past nine years.
The short-term may be shaky for cryptocurrencies, but many analysts see BTC at $ 100,000 to $ 150,000 during 2022.
As inflationary pressures within the traditional financial system arise, Bitcoin is expected to provide a haven as the digital store of value and the best anti-inflationary weapon of the last decade.
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